Title: Collaborative innovation: weak commitments and unenforceable contracts

Authors: John D. Hanson; Joachim Henkel

Addresses: Supply Chain Management Institute, University of San Diego, 5998 Alcala Park, San Diego, CA 92110-2492, USA ' TUM School of Management, Technical University of Munich, Arcisstr. 21, 80333 Munich, Germany

Abstract: Innovation that crosses organisational boundaries, such as those between buyers and sellers, requires complementary investments of assets by participants. This creates a contracting problem with the possibility of opportunistic behaviour. We show that this problem can be overcome using the mechanism of weak commitments. In situations where both parties can see a return on their investment in innovation that increases with their partner's investments, there is a bounded range of commitment that can be made unilaterally by either party within which cooperative behaviour becomes the dominant strategy for both parties. This finding is important because it shows that collaborative innovation is possible without the need for elaborate contracts or reliance on intangible constructs such as relational trust or reputational cost. This suggests that collaboration is possible in situations where it was previously considered unlikely and suggests new approaches to research on inter-firm collaborations.

Keywords: collaborative innovation; opportunism; weak commitments; game theory; prisoner's dilemma.

DOI: 10.1504/IJPM.2020.105196

International Journal of Procurement Management, 2020 Vol.13 No.1, pp.63 - 82

Received: 31 Jul 2018
Accepted: 02 Dec 2018
Published online: 14 Feb 2020 *

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